CAB v. AEROMATIC TRAVEL CORP.

The plaintiff, Civil Aeronautics Board ("CAB"), is seeking injunctive relief restraining the defendants, certain travel agencies and certain named individuals associated therewith, from engaging in certain business practices alleged to be violative of the Federal Aviation Program. The defendants move for various types of relief, including dismissal of the complaint.

The complaint alleges that jurisdiction is founded on 28 U.S.C. § 1345 and 49 U.S.C. § 1487. (To be discussed infra on the question of venue).

The defendants are alleged to be acting in violation of three aspects of the Federal Aviation Program: all of the defendants are alleged to be violating certain statutory provisions; all of the defendants are alleged to be violating certain regulations promulgated by the CAB; certain of the defendants are alleged to be violating a CAB cease and desist order.

With regard to the alleged statutory violations, it is claimed that the defendants, by virtue of their business practices, are indirect air carriers within the purview of 49 U.S.C. § 1301(3), (20), and (21) or indirect foreign air carriers within the purview of 49 U.S.C. § 1301(19) and (21);
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and that they have acted and continue to act as such without the required certification by the plaintiff under 49 U.S.C. § 1371(a)
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or the permit authorizing such acts under 49 U.S.C. § 1372(a).
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As to the regulatory violations, it is alleged that the defendants offer to sell and sell "charter" air transportation between the United States and Europe to the general public contrary to those CAB regulations governing charter air transportation, which are prohibited under 14 C.F.R. Parts 207.11(b) (2) et seq.

Finally, it claimed that certain of the defendants, Fred Meyrow and Lillian Meyrow, are acting in violation of CAB Order 71-6-117, which became effective on June 23, 1971. The Order directs a New York corporation, Charter Consultants, Inc., and Fred Meyrow, its president, to cease and desist from engaging in certain practices similar to those complained of herein.

For relief, plaintiff seeks a judgment permanently enjoining and restraining the defendants from violating the statutes, regulations, and order specified in the complaint. It also seeks judgment enjoining the defendants from failing to refund promptly to each purchaser of charter air transportation, whose contract may not be performed due to the alleged violations, the full consideration paid for such transportation. The plaintiff also seeks a preliminary injunction restraining the defendants from engaging in those practices alleged in the complaint. An evidentiary hearing on the application for a preliminary injunction has been adjourned without date pending a determination of motions made by the defendants directed to the complaint and the jurisdiction of this Court.

The defendants move to dismiss the complaint on several grounds. They maintain (1) that the case is not ripe for the exercise of this Court's jurisdiction since primary jurisdiction lies with the CAB; (2) that the complaint fails to state a cause of action; (3) that the filing of the complaint was not properly authorized by the CAB; (4) that the plaintiff has failed to join indispensable parties; and (5) that venue is not proper in the Eastern District of New York.

The question of primary jurisdiction will be discussed last since it is the most perplexing problem to be discussed.

I. MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM

Defendants argue that the regulations, in the light of specific allegations in the complaint, cannot apply to the defendants. They argue, essentially, that the defendants referred to in the particular paragraphs of the complaint are not "indirect air carriers" as defined in the statutes (49 U.S.C. §§ 1301(3), 1301(19)) and, therefore, they cannot be guilty of violations of 49 U.S.C. §§ 1371(a), 1372(a). They argue that the term "air carrier" is not defined in the Federal Aviation Act ("Act") nor by the CAB regulations. Several of defendants additionally argue that the defendants are ticket agents within the meaning of § 1301(35), and ticket agents are not bound by the sections of the Act or the regulations specified in the complaint.

Since all of the defendants in this case are alleged to be engaged in unlawful foreign charter service, the only relevant distinction between "air carriers" and "foreign air carriers" is that of the nationality of the defendant.

The definition of the term "air carrier" is a broad one including not only those persons who engage directly in air transportation but also those who so engage "by lease or any other arrangement"; that is, "indirect air carriers." The CAB maintains that the defendants operating in the manner alleged are indirect air carriers and therefore subject to the requirements of § 1371(a) and § 1372(a). They state that pursuant to the broad definition of "air carrier" in § 1301(3), the CAB has long regulated as indirect air carriers persons who do not themselves physically operate aircraft, but who, as principals or on their own behalf, hold out and sell air transportation services. It was stated in Hacienda Hotels-Motels, Rooms and Flight Reservations, Inc. and U.S. Aircoach Enforcement Proceeding, 26 CAB 372, 385 (1958), that:

"It is the view of the Board that in general, a person not directly engaged in the operation of aircraft is an indirect carrier if such person sells transportation by aircraft to the general public other than as an authorized agent of a direct carrier in the consummation of transportation arrangements between the operator of the aircraft and the passengers."

It is also argued that in the case of Pan American World Airways, Inc. v. CAB, 129 U.S. App. D.C. 159, 392 F.2d 483 (1968), it was held that certain tour operators were foreign air carriers. As bases for its ruling, the court noted that the tour operators arranged, operated, and conducted the tours; they determined how much each tour purchaser would pay for air transportation and connecting ground services; and aircraft and crews would be chartered by the tour operators. It should be pointed out that the court affirmed the Board decision not to exercise jurisdiction over the foreign tour operators involved, even though such jurisdiction was within the Board, on the grounds of impracticality.

The CAB also cites a recent case, Monarch Travel Services v. Associated Cultural Clubs, Inc., 71-1176-WPG, entered June 4, 1971 (C.D. Cal.), wherein the court entered an order for a preliminary injunction against illegal passenger consolidators who had been operating as a "club" in California. The CAB maintains that the legal basis for that order was identical to that in the instant case: defendants were found to be operating as indirect air carriers in violation of 49 U.S.C. § 1371.

The CAB also alleges that it has regulated as air carriers certain businesses which could be considered air carriers only through a broad construction of § 1301. Certain courts have concurred in such regulation. These businesses include air freight forwarders, tour operators who handle exclusive tour charters, unauthorized cooperative shippers of consolidated cargo, and travel agents and "clubs" offering air transportation as principals.

Therefore, the CAB argues that the defendants are "indirect air carriers" and "indirect foreign air carriers" and, as such, are required by § 1371(a) and § 1372(a) to have certificates or permits issued by the CAB authorizing them to engage in air transportation. It is alleged that the certificates (or permits) have not been issued; that the defendants are not exempted from the requirements by statute; nor have they been exempted by CAB order.

The plaintiff alleges facts, which if proven, would constitute "engaging in air transportation." It is also alleged that in doing the acts complained of defendants are acting as indirect air carriers without a certificate of public convenience and necessity in violation of 49 U.S.C. § 1371(a). The question of whether defendants are indirect air carriers is the basic question in this case.

This Court feels that it must sustain the arguments of the plaintiff that the complaint sets forth allegations sufficient to state a cause of action although such allegations are questions of fact to be proven. Therefore, the motion of the defendants to dismiss on this ground is denied.

II. THAT THE FILING OF THE COMPLAINT WAS NOT AUTHORIZED BY THE CAB

The defendants rely on the case of Morgan v. United States, 298 U.S. 468, 80 L. Ed. 1288, 56 S. Ct. 906 (1936). The Morgan case was followed by a series of three " Morgan " cases, all of which watered down the first holding, and, in fact, in the last of the series, the Supreme Court virtually overruled its initial ruling. The defendants' reliance thereon is misplaced. The case now before the Court is distinguishable from the Morgan cases in many respects, and, in addition, in this case, the CAB has filed a copy of the Board authorization, dated September 15, 1971, by which this action was authorized. See, Morgan v. United States, 304 U.S. 1, 58 S. Ct. 773, 82 L. Ed. 1129 (1938); United States v. Morgan, 307 U.S. 183, 59 S. Ct. 795, 83 L. Ed. 1211 (1939); United States v. Morgan, 313 U.S. 409, 61 S. Ct. 999, 85 L. Ed. 1429.

Therefore, the motion of the defendants on this ground is denied.

III. THAT THE CAB HAS FAILED TO JOIN INDISPENSABLE PARTIES

The defendants claim that it is not alleged that defendants held themselves out as providing air transportation or did so engage themselves; it is alleged the defendants sold tickets of other air carriers who are not before this Court. Those air carriers, identified in the affidavits and exhibits in support of the CAB motion, include Dan Air Services Ltd., Donaldson Airways, Laker Airways, Pan American World Airways, Trans International Air Lines, and Universal Air Lines, Inc., and it is argued, should be enjoined since they are indispensable parties under Rule 19, Fed. R. Civ. P.

It is argued that the CAB, in commencing this action against the defendants because of the "vast black market in air transportation", has ignored the air carriers who have in fact provided the transportation service involved. The defendants submit that these air carriers are indispensable parties in that a decree cannot be rendered by the Court which will not affect their interest and because their absence leaves the controversy ...

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